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Deeply in debt, Greece faces a Spartan future

February 10, 2010|By Henry Chu

Crucial to the austerity plan's success is whether ordinary Greeks see the pain as fairly shared.

"There's a growing appreciation on the part of a lot of people that the situation has come to an impasse somehow and something has to give," Massourakis said. "Of course, everybody wants somebody else to give rather than themselves."

That may explain why the government recently mounted a high-profile tax crackdown on private physicians in a posh Athens neighborhood, where stories are rampant of doctors declaring minuscule incomes but sailing the Aegean in luxury yachts.

Tax evasion in Greece is practically an Olympic sport, greased by a culture of under-the-table transactions; the "black economy" is estimated to equal one-third of GDP.

Although the current government has been left holding the bag, Greece's problems have been building for years.

Greece's adoption of the euro in 2001 led to a period of national euphoria and encouraged a cavalier attitude in succeeding governments, Massourakis said. No longer focused on foreign-exchange reserves and balances of payments -- as they were when the country had to protect its own currency, the drachma -- officials were happy to keep benefits and pensions generous and run up big deficits.

That has exposed one of the weaknesses of European monetary union: Despite a common currency, eurozone nations maintain control of their individual budgets, and EU authorities have few ways to enforce rules on fiscal discipline.

henry.chu@latimes.com

Times staff writer Tom Petruno in Los Angeles contributed to this report.

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